Starting a business to fill Vacancies

[Don Konipol]

We purchased 60% ownership interest in a retail/service center just after Covid hit for essentially nothing except (1) the ability to refinance the existing 12% loan past due for a 15 year loan at 4% fixed rate interest, and putting up $200,000 of working capital to carry the property while most rent was not being collected. As it so happens all our tenants except the largest moved out or went belly up - leaving 80% vacancy. 

Our 40% partner who was managing the property had an idea - he asked and we allowed him to use $70,000 of the working capital to start businesses to fill the vacancies.  He started, got approvals for, and built the necessary buildouts for a daycare center, a smoothie shop, and a religious bookstore.  He was able to sell these businesses within a year of startup, and at a $45,000 profit.  We okayed him keeping the profit for himself to partially comp him for the effort.  After a year of stabilized occupancy we sold the center for a rather good size profit.